Price Skimming

Price skimming is when a marketer sets a price relatively high with the intentions of eventually lowering it over time; it is a form of price temporary discrimination. A company might consider using the strategy of price skimming when first entering a market for a number of reasons.

Establishing the brand

Marketers often want to base their brand off of quality or status. Price skimming is a great way for marketers to reach their target market by establishing how their brand is perceived.

Perceived Quality

There are many different ways that consumers perceive quality, price being the most obvious. Usually when something is more expensive it is also better quality (or so we think). Using a price skimming strategy provides a perceived idea that the quality is greater than something that is similar but less expensive.

Attract the status driven customers

The status driven customers are always concerned about the price but not in the way that most of us are, they want the price to be high. This group of customers is all about looking prestigious and wealthy. Price skimming creates those high priced items that the status driven customers are looking for and "HAVE" to have.

Early Adopters

In the PLC (product life cycle) some of the quickest people to purchase a new item to the market are the early adopters, these people are generally willing to pay more than the later majority of purchasers. If a marketers sees that his/her firm is one of the only firms in the market he/she will use price skimming because he/she knows that they have control over the pricing of that market and have no competition.

Recover costs

As you can imagine startup costs for a business are not cheap. Price skimming can quickly recover those research and development costs that occur when starting a business or entering a market with a new product. 

Works Cited:

Brookins, Miranda. "What Are the Benefits of Skimming Pricing Strategy?" Small Business. N.p., n.d. Web. 09 Nov. 2015.